RBA interest rates: Michele Bullock’s board expected to hold fire until at least November

The odds are stacked against mortgage relief for homeowners on Tuesday as analysts hotly debate whether the Reserve Bank will have room to cut interest rates again this year.

A cut at the September meeting — held over Monday and Tuesday — was always unlikely given the RBA dropped rates in August and has signalled consecutive moves were off the agenda.

But a higher-than-expected inflation figure last week sparked a handful of economists to warn that the central bank may leave rates on hold well into next year.

The numbers released on Thursday had mixed messages and will leave the RBA waiting for a clearer picture on cost of living, which will be released late next month.

Headline inflation of 3 per cent to August was the highest in a year thanks to government power rebates ending, yet the RBA’s preferred measure of core inflation fell slightly to 2.6 per cent.

Financial markets still judge a cut by December a close call, but confidence has been shaken and analysts will be looking for any signs of fear in Governor Michele Bullock’s comments after the meeting.

HSBC chief economist Paul Bloxham brushed off the notoriously unstable monthly data and expects a further rate cut in November.

“Last week’s market reaction to the monthly (consumer price) indicator seems to us to be a bit overdone and perhaps a bit topsy turvy,” he said on Monday.

“The recent market reaction has also not been the first time the market has moved a lot on the CPI indicator print, only to see that it was a biased guide.”

He pointed to mid-2024 when a surprisingly hot monthly inflation figure shocked markets — which was followed by a lower than expected quarterly core inflation figure.

“The RBA should be comfortable at present, as they are where they need to be,” he said.

“So this week we see the cash rate kept firmly on hold. However, as we noted, although our central case is for cuts in November and February, there is some risk of fewer cuts.”

AMP’s Shane Oliver also warned against putting too much focus on monthly inflation figures and expected a “close call” fourth cut in November.

But Judo Bank’s Warren Hogan ditched his prediction of a November move and expects the RBA to keep the cash rate on hold at 3.6 per cent until well into next year.

“With momentum building in the private sector and inflation picking up pace, our central case view is that the next move will likely be an increase in the cash rate, with November 2026 pencilled in,” Mr Hogan said.

“The downside risk is a more gradual consumer recovery, emerging weakness in the labour market driven in part by technological adoption and persistent business insolvencies, and a sustained increase in the unemployment rate, all of which could lead the RBA to cut instead.”

Unemployment remains near historic lows at just 4.2 per cent in a sign that there’s no rush for the Reserve to lower rates, while economic history shows inflation can bounce back rapidly when monetary policy is relaxed too quickly.